We are studying the mechanisms that maintain constitutive heterochromatic regions in a condensed form. For this purpose we originally used a well characterized 16 kb heterochromatin segment located upstream of the chicken beta globin locus. In other published studies we have measured the hydrodynamic properties of this fragment, which is typical of a large proportion of vertebrate genomes, and which has the potential if unregulated to silence adjacent genes in a manner deleterious to cellular function. We found that maintenance of the condensed structure is coupled to low level transcription in the region, and that elevation of levels of histone acetylation by use of histone deacetylase inhibitors (TSA) markedly increases transcription. We asked whether Dicer/Argonaute dependent mechanisms could be involved in formation of this heterochromatic region. We found that depletion of Dicer by siRNA resulted in opening of the condensed chromatin structure much as what was observed following TSA treatment. Furthermore, Ago2 is bound to this region in a Dicer-dependent manner. We have now investigated the binding of Ago2 to the ribosomal gene repeat locus in the HEK293T cell line. We find that there are chromatin binding sites for AGO2 throughout the 45S region of the human rRNA gene, reflecting Ago2 interaction with sites on the nascent 45S RNA transcript. The interactions are specific,mediated by binding of microRNAs to the RNA. Knockdown of Ago2 resulted in an increase in rRNA expression, suggesting a regulatory role for Ago2 within the nucleolus.